Participant Loans

[2muchstress]

I'm a TPA considering increasing the setup fees for participant loans. I am curious as to how much other TPA's charge for this service. I currently charge a $100 fee. By the time the documents are prepared, funds liquidated, trustees are tracked down for signature, checks issued, numerous phone calls from participant, etc... it seems like I spend 2-3 hours setting up every loan (not to mention the extra time to administer throughout the life of the loan).

How do others handle this dilemma? Thanks in advance for your responses.

[MR]

we charge $75 set-up fee, plus $35 annual maintenance. i've started encouraging clients to pass all fees along to participants. they might reconsider borrowing $1,000 for 3 years if its going to cost them $180 to do it.

[maverick]

We charge a $100 set-up fee, and no annual maintenance fee. We're going to up the set-up charge soon, probably to $150. I agree with MR, we have more than $100 in charge time, probably over $150 in some cases.

- Receive the app

- Check to make sure that the person has enough vested $$ to support the loan amount (employer doesn't bother checking, just signs the app)

- Run an amort sched

- Prepare the note

- Sell the funds

- Cut the check

- Answer participant phone calls throughout this process.

- Etc., etc.

Here's a good one:

Last year a guy applied for a $400 loan to "purchase a vee-hickle." He was willing to pay the $100 fee to get $400. Too bad the min. loan is $1,000.

Anyway, he called the VRU every week or so until his vested balance hit $2,000, then resubmitted for a $1,000 loan.

The bottom of the loan app says (in bold) "Please allow 4 to 5 weeks from the day the app is submitted until you receive the loan check."

He called the day I received the app wondering when he could expect his $$!!!!!!!!!

Maverick

[Brian Gallagher]

my company generally charges $75 set-up with 60$ annual fee charged at $15 quarterly. the plan has the option to pay either or both fees or have the participants pay either or both.

Larger clients ($10mm+) generally have this waived.